The country of unlimited possibilities

08.12.2018

To attract investment, all countries shout out the benefits they offer­. Perhaps it’s about the benefits of potential labor or a niche industry they excel at, each country markets what potentials awaits future investors. Even if they have high tax rates, an average standard of living, they develop special citizenship programs to develop the economy. Ukraine is modestly on the sidelines. While politicians shout about the need to attract investors, there is no audible answer to what Ukraine offers which is a pity as Ukraine is a place of unlimited possibilities.

Simplified tax system as a domestic offshore

The basic tax rates and fees in Ukraine: The official tax rates of Ukraine are an income tax of 18% plus 1.5% (19.5% total) to fund the military conflict in the country. VAT stands at 20% and 22% tax is levied for contribution to the social services fund (pension fund). The uniqueness of the tax system is that for a segment of small and partly medium-sized businesses, you can use a simplified system that assumes payment of turnover tax, without paying VAT and income tax.

If we consider a single tax as an analogue of sales tax, we can say we have both a European and American taxation system. The combination of "multi-tax" entities allows reducing the actual amount of taxes paid to 7-10% of business revenue. And Ukrainians are not shy to multiply such companies or private entrepreneurs. Instead of a salary, they receive dividends that are taxed 2-3 times lower than income (tax rates are 5% and 9%).

Thousands of companies exist only to reduce the tax responsibility for income and VAT. For this reason, our businessmen may find a similar business abroad unviable.

Every year the government threatens to take action with such methods of doing business, but in fact it suits everyone.

Short-term and profitable projects

Ukrainians make money faster than citizens of other countries. The constantly changing economic situation, the rise and fall in foreign exchange rates, legislative restrictions, or changes in tax legislation force entrepreneurs to react quickly to changes. Therefore, the payback period of domestic projects is shorter, profitability is higher, and forecasts are no more than a couple of years. Business planning is not like a typical development plan, but operates considering much contingent planning.

Ukrainian business is distinguished by flexibility, speed of decision-making, and willingness to go "all-in".

The point of entry into a business is lower than average compared to Europe, and with other things being equal, it is necessary to invest less money in a Ukrainian business compared to Prague or Warsaw.

Freedom and impunity

In Ukraine, there is no licensing requirement for an extensive list of activities. Try opening a legal or accounting firm in Europe, and you will learn about mandatory certification and licensing of professional activities. In Ukraine, most of these barriers are non-existent. For example, if you became an accountant after a three-month course – you can open a specialized company without barriers. This is even worth mentioning separately.

Liquidating a business by changing ownership is a common practice of closing a failing business. Numerous errors in accounting, underpayment of taxes, incorrect salary calculations – can be buried without consequences, having sold the company to citizens from Central Asia.

Lack of capital investment

Many small and medium-sized companies in Ukraine experience a lack of capital. Hundreds and thousands of brilliant, profitable, and innovative projects, from the Ukrainian market do not find funding. Officially applying for a loan is often unrealistic as there is an insufficient degree of transparency. And the burdens of increased transparency kill profit margins.

A foreign investor, offering microcredit projects in the Ukrainian market will earn high interest providing such short-term financing notes.

How to invest in Ukraine? The status of a foreign investor.

Many countries offer citizenship or tax residency programs to attract investment. Recently, even a country such as Moldova presented a tax residency program for investments – Moldova Citizenship By Investment Program (MCBI). According to the terms of this program, an investor who wants to obtain a tax residency in Moldova for investments, is obliged to make a minimum non-refundable contribution in the amount of 135,000 euros to the fund for the socio-economic development of the country. It is surprising that a country of the post-Soviet space, with merely 3.5 million people, presents the advantages of residence on a par with the countries of the Caribbean and plans to attract 1.5 billion US dollars in the next 5 years.

Ukraine is not trading in citizenship yet, and in my opinion, in vain. According to our laws, dual citizenship is prohibited. Therefore, being a citizen of Ukraine is impossible or illegal if you want to retain the citizenship of another state. But you can get a work permit and then a residence permit if you open a business in Ukraine and have the status of a foreign investor. The law regarding Employment of the Population contains the guidelines for obtaining a work permit for a foreigner who has opened his own company in Ukraine.

For the status of a foreign investor, it is necessary during the year to make a capital investment in a Ukrainian company in good standing in the amount of 100,000 US dollars. Contribution is allowed both in money and assets, and the value of the assets should be documented. For several months, the investor can apply for a residence permit, and legally reside in Ukraine while managing his project.

Undoubtedly, the country's budget deficit and the gradual tightening of business conditions will eventually change the current state of affairs in Ukraine. But now it is worth to invest and earn.